No oil discovery narrative seems to have captured investor consideration this yr as a lot as Reconnaissance Africa’s (TSXV:RECO, OTC:RECAF) acquisition of the rights to Namibia’s large, 6.3-million-acre Kavango Basin, which was adopted in brief order by two confirmations of an lively petroleum system.
It’s captured our consideration for a number of causes; not the least of which is that onshore discoveries are just about a factor of the previous, besides within the ultimate frontier of Africa, the place Namibia—which has by no means produced a barrel in its historical past—is anxiously awaiting the potential for its day within the vitality highlight.
It’s additionally captured our consideration as a result of it is a junior explorer who’s sitting on what we predict is a supermajor-size basin, and it’s fully-funded for its present 3-test nicely drill marketing campaign.
But in latest weeks, our consideration has been drawn by experiences of shock early outcomes—twice. And now, there’s a lot to probably sit up for in the approaching days and weeks.
On Monday final week, ReconAfrica introduced that it had completed its second drill at its 6-1 stratigraphic take a look at nicely. In a matter of days, we’re anticipating the outcomes from that drill.
Expectations are excessive as a result of not solely did RECO present indications of an lively petroleum system in its first test-well drill (6-2), but it surely additionally confirmed over 200 meters (over 660 toes) of oil and pure fuel indicators over three discrete intervals in a stacked sequence of reservoir and supply rock.
Expectations are additionally excessive as a result of solely half manner into the second drill (6-1), within the shallow part, RECO once more supplied clear proof of an lively petroleum system, with 134 meters (440 toes) of sunshine oil and fuel reveals.
Now, RECO is launching 2D seismic, and shortly to launch full drill outcomes from (6-2)—the nicely that’s already delivered constructive ends in the shallow sections.
Everything Lines Up in RECO’s Favor
Everything seems to be lining up in RECO’s favor, from day one once they took the large leap of religion to amass the rights to this large basin in Namibia, after which so as to add one other large part of the identical basin in Botswana. That gave them a complete of 8.5 million acres.
An enormous enhance of confidence got here first from Bill Cathey, an business acknowledged geologist for the most important oil corporations on this planet, who carried out the magnetic survey interpretation for RECO. Cathey got here out saying that, “Nowhere in the world is there a sedimentary basin this deep that does not produce hydrocarbons.”
Then got here Daniel Jarvie, a number one geochemist and supply rock professional who’s now all-in on RECO (TSXV:RECO, OTC:RECAF) … Jarvie estimated, conservatively, that the basin has generated billions of barrels of oil and fuel. He appreciated what he noticed—quite a bit—so joined the RECO crew.
The firm experiences it has full authorities help—native and nationwide, and has been serving to Namibia from the beginning, from drilling water wells for Kavango residents who’ve restricted entry to potable water, to serving to to fund the nation’s COVID-19 vaccine rollout.
Short-Selling Desperation May Have Hit Fever Pitch
So, now, with two confirmations of an lively petroleum system below its belt, new outcomes anticipated simply days away, 2D seismic having launched… we predict those that have taken on huge quick positions in opposition to RECO are totally determined.
That desperation could have led to organized media campaigns in opposition to the corporate, in what we predict is an try to convey the inventory down sufficient to provide them time to cowl their shorts earlier than there isn’t a longer any approach to cease the march ahead in Namibia. (You can read more about short and distort campaigns and the lengths short sellers will go to here on Seeking Alpha.)
No one can know what is going to occur subsequent, however in our view there are sufficient breadcrumbs to comply with within the newest press releases:
– ReconAfrica’s Response to Short Seller’s Biased and False Short Report – June 28, 2021
One of a very powerful breadcrumbs comes within the newest press launch from Monday, which tells us that each take a look at wells, 6-2 and 6-1, can have a VSP (vertical seismic profile instrument) run by means of them, connecting them alongside the identical seismic line. And later this month, the corporate says casing might be run and cemented to isolate the potential hydrocarbon bearing zones.
Investors who don’t have any background in geology would possibly now be capable to interpret this clearly, however for us, essentially the most essential breadcrumb is that this: ReconAfrica would by no means fund the advanced operation of working a VSP to tie these two wells collectively alongside the identical seismic line if there wasn’t a possible for one thing large there—in each wells.
There are many catalysts right here that stand to make the approaching days very fascinating for traders:
Now that the second drill has been accomplished, RECO (TSXV:RECO, OTC:RECAF) experiences it’s making a number of logging runs and that as much as 50 sidewall cores might be taken to maximise potential hydrocarbon restoration. Once that’s full, the VSP is run as a part of the 2D seismic program.
RECO (with its accomplice NAMCOR, the state oil firm) acquired approval from the Namibian authorities on July seventh for seismic and can start acquisition of the preliminary 450 km 2D seismic program throughout the Kavango basin any day.
That will final for approx. 6-8 weeks.
There are so many issues we count on information releases on within the coming days and weeks:
– Results from the second take a look at nicely
– Results from the 450km 2D seismic
– The launch of the third take a look at nicely drill, almost definitely after the seismic acquisition
– And hopefully some potential JV farmout offers with the majors, who will little question be watching like hawks for the following lab and 2D outcomes—and that might be some of the thrilling issues for traders
Furthermore, we predict there’s purpose to be enthusiastic about 2D seismic outcomes. So does Polaris, Canada’s oldest seismic firm contracted to do it:
Polaris COO, Joe Little said, “The acquisition plan is progressing very well for a successful recording launch in mid July. Given our past success with the environmentally friendly Explorer 860 source units on past projects in Africa and given the very high resolution parameters designed by ReconAfrica’s seismic team, we anticipate getting excellent data results on the project.”
What has made an organized misinformation marketing campaign so laborious to handle on the a part of quick sellers is the proven fact that RECO isn’t a fly-by-night junior explorer and a whole lot of RECO’s on-line followers seem like very nicely knowledgeable and are maintaining fellow traders up so far, which for a brief and warp marketing campaign is an issue as they want uninformed traders for his or her unlawful methods to work:
It’s tough for us to second-guess outcomes and operations when a number of the largest names within the business are concerned, together with the likes of large Schlumberger, and Polaris. None of the businesses concerned on this operation could be keen to affiliate themselves with a fraudulent oil exploration play. And we predict quick sellers are having a tough time masking as a result of RECO (TSXV:RECO, OTC:RECAF) has achieved all the things by the e book, with a number of the greatest within the business. There could also be no different approach to method a basin of this dimension. This is just not one other Canadian micro-cap plopping itself down on a random piece of Alberta and pretending to drill whereas taking investor cash. This is the massive time, and it might find yourself being our final large onshore oil discovery—ever.
The subsequent time you learn a narrative like this, it can most likely be within the deep waters, the place no junior firm can journey alone. Oil narratives like this are probably once-in-a-lifetime, and that’s exactly what could have quick sellers so frightened. They could have ended up on the mistaken aspect of exploration historical past.
Other oil corporations price keeping track of:
The firm, Enbridge Inc.(NYSE:ENB, TSX:ENB), is a Canadian multinational vitality firm. Founded in 1949 by the World War II veterans Kenneth W. Dam and Arnold R. Parry, it has since grown to be considered one of North America’s largest pipeline corporations with over 2 million miles of pipelines throughout Canada and the United States. They additionally present companies for fuel transmission, pure fuel storage, distribution in addition to energy era and electrical energy retailing. They have greater than 150 years mixed expertise in growing vitality infrastructure that gives Canadians with reasonably priced vitality that they will depend on to warmth their properties throughout lengthy winter months or cool them down throughout sizzling summer time days.
Enbridge is in a singular place as oil and fuel phases its 2021 comeback. As one of many extra probably undervalued corporations within the sector, it could possibly be set to win large this yr. But that’s provided that it might probably overcome a number of the challenges in its path. Most particularly, its Line 3 challenge which has confronted scrutiny from environmentalists.
Canadian Natural Resources (NYSE:CNQ, TSX:CNQ) is considered one of the most important names within the Canadian vitality sector with operations spanning throughout North America and Western Europe. The firm has been round since 2010 however has had roots relationship again to 1952 when Panarctic Oils was based by Harold Lothrop, Kenneth Lothrop (Harold’s father), and two different companions.
Like Enbridge, Canadian Natural Resources has struggled by means of the pandemic, however the companyhas been in a position to do what a lot of its Canadian counterparts haven’t been in a position to, maintain its dividend intact after swinging to a loss for the first half of the COVID pandemic, whereas Canada’s producers are scaling again manufacturing by round 1 million bpd amid low oil costs and demand. Though Canadian Natural Resources stored its dividend, it withdrew its manufacturing steering for 2020, nevertheless. It additionally stated it will curtail some manufacturing at high-cost typical initiatives in North America and oil sands operations and perform deliberate turnaround actions at oil sands initiatives within the second half of 2021.
Suncor Energy (NYSE:SU, TSX:SU) is an vitality firm that has a robust concentrate on sustainability. They work laborious to make sure their merchandise are secure, dependable, and sustainable. With the business altering so quickly in latest years- with the ability to sustain with change is essential for achievement. Suncor has at all times been a frontrunner on this space of innovation and it will proceed ahead as such- maintaining all stakeholders completely happy!
Suncor is a Canadian oil and fuel firm that has been in enterprise for over 75 years. They are one of many largest producers of crude oil, artificial crude oil, pure fuel liquids (NGLs), and petrochemicals in Canada. Suncor’s operations embrace exploration and manufacturing from greater than 100 fields situated throughout Alberta, Canada, in addition to refining and advertising actions in North America.
Finally, now that oil costs are lastly on the rise as soon as once more, giants like Suncor seeking to capitalize. While lots of the oil majors have given up on oil sands manufacturing – those that concentrate on technological developments within the space have an ideal long-term outlook. And that upside is additional amplified by the proven fact that it’s at present trying significantly under-valued in comparison with its friends, particularly as lithium, which is current in Canada’s oil sands, turns into an much more fascinating commodity.
TC Energy Corporation (TSX:TRP) is a Calgary-based vitality large. The firm owns and operates vitality infrastructure all through North America. TC Energy is among the continent’s largest suppliers of fuel storage and owns and has pursuits in roughly 11,800 megawatts of energy era. It’s additionally one of many continent’s most essential pipeline operators. With TC Energy’s large affect all through North America, it’s no surprise that the corporate is amongst considered one of Canada’s strongest and well-known corporations.
Like various its friends, considered one of TC Energy’s largest challenges in recent times was grappling with the significantly tough approval course of for its Keystone Pipeline. But that’s all historical past now, and with the bounce again in oil and fuel demand, TC Energy might stand to profit. While TC Energy’s inventory worth has but to recuperate from pre-pandemic ranges, it is among the few business giants which has managed to maintain excessive dividends rolling in.
Westshore Terminals (TSX:WTE) is a coal export terminal situated at Roberts Bank Superport in Delta British Columbia. It is Canada’s largest coal export facility, surpassing the mixed coal shipments of all different terminals in Canada. The firm exports thermal and metallurgical coals to markets world wide, together with Japan, South Korea, China, India and Taiwan. Westshore additionally affords companies to ship numerous bulk cargoes by means of its marine services. Westshore Terminals has been working for over 30 years and employs greater than 240 workers that work 24/7 shifts to make sure steady operation. Despite its success and longevity, nevertheless, is more and more being focused by quick sellers.
Short sellers are corporations like Westshore Terminals primarily based on a easy reality: they’re within the coal enterprise. While the fossil gas business isn’t fairly down for the rely simply but, coal is seeing a significant decline that isn’t more likely to sluggish anytime quickly. And with out a vital pivot, Westshore’s days could possibly be numbered.
Great-West Lifeco (TSX:GWO ) continues to be a preferred inventory amongst quick sellers on the TSX. This North American and European monetary companies holding firm has seen its shares drop 8.9% yr over yr but it nonetheless attracts curiosity from traders globally as a consequence of its wholesome steadiness sheet, sturdy money flows, and extra.
Is the quick curiosity justified? Their document as dividend payers may be very sturdy: Great West has been paying out a median annualized return on funding (ROI) for stockholders since 1948 that at present sits just under 7%. It additionally affords a quarterly dividend yield with dividends paid each three months which equals about 6%, or greater than 5 instances what most individuals can count on to earn by means of investing in financial savings accounts at present. This might emerge as an enormous incentive to combat off the quick sellers and maintain the inventory afloat for a lot of loyal traders.
Pembina Pipeline Corp. (TSX:PPL) is an organization that has been round for greater than 50 years and was the primary pipeline firm in Canada to supply fuel transmission companies. They are actually one of the biggest pure fuel transmission corporations in North America with an annual throughput capability of just about 66 billion cubic toes per day.
Pembina Pipeline Corporation is a Canadian vitality infrastructure enterprise that gives merchandise reminiscent of pure fuel, oil, renewable energy, and chemical substances to clients primarily situated on the japanese coast of North America from its operations in Alberta, British Columbia, Ontario and Quebec.
MEG Energy Corp (TSX:MEG) is a Canadian vitality firm that gives pure fuel and renewable energy merchandise and companies to clients in Canada, the United States, Europe, and Asia. The firm operates in three segments: Pipeline Services; Power Generation Services; Renewable Power Production. MEG has been in a position to develop their pipeline enterprise by partaking with key stakeholders on regulatory fronts throughout North America in addition to by means of growth of their current pipeline community.
The firm’s giant confirmed sources and their cutting-edge know-how make MEG a promising firm for traders seeking to get in to the promising oil sands in Alberta.
By. James Stafford
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Forward-Looking Statements. Statements contained on this doc that aren’t historic information are forward-looking statements that contain numerous dangers and uncertainty affecting the enterprise of Recon. All estimates and statements with respect to Recon’s operations, its plans and projections, dimension of potential oil reserves, comparisons to different oil producing fields, oil costs, recoverable oil, manufacturing targets, manufacturing and different working prices and chance of oil recoverability are forward-looking statements below relevant securities legal guidelines and essentially contain dangers and uncertainties together with, with out limitation: dangers related to oil and fuel exploration, together with drilling and different exploration actions, timing of experiences, growth, exploitation and manufacturing, geological dangers, advertising and transportation, availability of satisfactory funding, volatility of commodity costs, imprecision of reserve and useful resource estimates, environmental dangers, competitors from different producers, authorities regulation, dates of graduation of manufacturing and adjustments within the regulatory and taxation surroundings. Actual outcomes could range materially from the knowledge supplied on this doc, and there isn’t a illustration that the precise outcomes realized sooner or later will be the identical in complete or partially as these introduced herein. Other components that might trigger precise outcomes to vary from these contained within the forward-looking statements are additionally set forth in filings that Recon and its technical analysts have made. We undertake no obligation, besides as in any other case required by legislation, to replace these forward-looking statements besides as required by legislation.
Exploration for hydrocarbons is a extremely speculative enterprise essentially involving substantial danger. Recon’s future success will rely on its potential to develop its present properties and on its potential to find sources which might be able to industrial manufacturing. However, there isn’t a assurance that Recon’s future exploration and growth efforts will outcome within the discovery or growth of economic accumulations of oil and pure fuel. In addition, even when hydrocarbons are found, the prices of extracting and delivering the hydrocarbons to market and variations available in the market worth could render uneconomic any found deposit. Geological situations are variable and unpredictable. Even if manufacturing is commenced from a nicely, the amount of hydrocarbons produced inevitably will decline over time, and manufacturing could also be adversely affected or could must be terminated altogether if Recon encounters unexpected geological situations. Adverse weather conditions at such properties might also hinder Recon’s potential to hold on exploration or manufacturing actions constantly all through any given yr.
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